Wednesday, August 20, 2014

A year after the violent dispersion
of protesters at Rabaa and Nahda squares in Cairo Egyptian President Abdel Fattah Sisi has reason to be pleased
with the state of the world.The early
mutters of disapproval in Washington have died down and even a recent report by
Human Rights Watch asserting that the government crackdown on supporters of
former President Muhammad Morsi comprised a series of crimes against humanity
will probably be ignored. That Egypt today, with an authoritarian regime underwritten by the armed forces, is far less torn by conflict than Libya, Syria, or Iraq may be one reason for feeling self-satisfied. Another, and one of the
most surprising reasons for such feelings, besides the usual cynicism of international
politics and foreign policy, is due to the remarkably accommodating policies of
Egypt’s neighbor to the northeast, Israel.

While
the most common optic used to view events in the region remains that of the
Israeli-Palestinian conflict, it has also become increasingly fashionable to
think in terms of a struggle for influence between the Kingdom of Saudi Arabia
(aided by its friends in the United Arab Emirates) and the Islamic Republic of
Iran (with an occasional assist from Qatar).Through these lenses Egypt is no longer an independent player in the
Arab world but merely a dependent supplicant for favor in a conflict between
far more powerful forces.While this may
be true to some degree, it ignores how rapidly Egyptian diplomacy has used the
assets—meager as they may be—at its disposal to reverse the negative
impact of the criminal violence through which the current regime came to power.Whether this is due to remarkable skill or
dumb luck remains to be seen, but the new government has done a superb job of
taking advantage of opportunities.

Not
the least of those assets has been Israel.To say this is to admit an unconventional view of the current situation
in the region.The dominant approach is
to say that Egypt is the ally or even the cat’s paw of Israel.The Israelis, after all, rely on Egyptian
weakness to carry out their assault on Gaza and Israel is the dominant military
and economic power in the eastern Mediterranean. Many believe that Egyptians
(and thus any democratically elected Egyptian government) really want nothing
more than for their army and their economy to come to the aid of the beleaguered
Palestinians.Exactly why, after even
the Morsi government closed down tunnels to Gaza and maintained the blockade, anyone should unquestioningly believe this is
something of a mystery. It is true that the Muslim Brotherhood, of which Morsi
was a leading member, had a fraternal relationship with Hamas.It is equally true that the Freedom and
Justice party leaders vociferously campaigned at rallies on their intentions to liberate Jerusalem. As all the little communist parties of the world learned to their sorrow
during the years of Stalin’s Comintern, the interests of big brother take
precedence.Morsi and his allies may
have talked a good game of fighting Zionism but in the end they turned out to be
mainly interested in the victory of Islamism in one country.

The
Sisi government (which includes the transitional period) is far less enamored
of the Palestinian cause and Hamas than was the Muslim Brotherhood.The new government, faced with continuing
unrest in the Sinai Peninsula and ongoing armed attacks on border guards,
police and army units, sees the entire region as a security threat.Gaza is, in this view, a source of and a
refuge for armed elements that the new government sees as threatening.That Hamas militants paraded through the
streets of Gaza before the recent fighting while holding weapons and making the
raised four-finger sign of Rabaa could not have been pleasing to President Sisi
and his government.

Egypt’s
new generals, it has been widely observed, have little combat experience.Unlike former Defense Minister Tantawi they
never fought the Israeli Defense Forces.If they have never been victorious in battle neither have they suffered
defeat at the hands of the IDF.Nor does
the Israeli government of Benjamin Netanyahu appear to harbor any ill will
toward an Egyptian military that stolidly guards its own borders.On the contrary, ministers and pundits
alike committed to the Netanyahu government see political Islam
(whether in Iran or the Arab world) as the most dangerous strategic threat they
face.In their rhetoric, and perhaps in
their own strategic calculus, the Muslim world is a seething cauldron of rage
about to pour down on the Jewish state.Against
this possibility the Egyptian military are a bulwark.

It is
thus not so surprising that Israeli diplomats and American organizations
strongly connected to Israel urged the Obama Administration not to cut aid to
Egypt in the wake of the coup.One way
to look at this is that the new regime in Egypt had been rewarded for truckling
to Israel.Another way—at least as
honest a description—would be that the Israeli government carried water for the
Egyptians.To repeat: the Israeli
government judged its interests best served by aiding the strategic interests
of the Egyptian regime in exchange for no formal promises or assurances.

Israeli
intelligence about Gaza is known to be relatively impoverished. Unsurprisingly,
Israel is better informed about the more open society in the West Bank than
what many describe as the open air prison of Gaza.Despite the fantasies of Jeremy Bentham and
Michel Foucault, prisons are not easy places to observe nor does the Hobbesian
world of incarceration lend itself tostable
patterns of alliance or preference.If
Israeli officials rely to any degree on Egyptian colleagues for intelligence
about Gaza, they would not be the first occupying power to risk being systematically
misled by those from whom they seek information.

Israel’s
assault on Gaza and weakening of Hamas has gone well for President Sisi.The Israelis and Islamist Palestinians have
wounded each other.Hamas has been
materially weakened and Israel has, in the eyes of important sections of the
developed world, forfeited much of its moral and political capital.Egypt, a country which for a year had labored
under the threat that the US or the European states would diminish both
economic and diplomatic support has now become once again a crucial
interlocutor.In fact, as President
Obama’s attention is drawn increasingly to Syria and Iraq as well
as Ukraine, Egypt is a welcome partner. Cairo becomes the venue and the
primary agent in facilitating talks between the two warring parties.Whatever possibility there was that the Obama
administration would further cut aid to Egypt has vanished in the plumes of
Hamas’s rockets and the explosions of Israeli ordnance.

On
the home front the picture facing the Egyptian government is less rosy, but it
is not quite as dismal as Sisi’s opponents suggest.A year after the government violently
dispersed the demonstrations at Rabaa and Nahda squares, it has managed to
write and implement a new constitution.That
the new constitution was approved by 98% of the voters and President Sisi
elected by 96% has not embarrassed the new government nor does it seem to be an
element of popular discontent for now.

The
government faces far more severe problems than the validity of its mandate.It has so far proven incapable of resolving
many of the issues that President Morsi unsuccessfully confronted.In the process it has become clear that the
profound challenges that faced the Morsi government were not manufactured by
the deep state, foreign interests, or anything other than the present structure
of the Egyptian economy and politics.

There
has been significant commentary about Egyptian food imports and the dire
consequences of bread shortages in a country where bread is a necessary dietary
staple.Nevertheless, among the most
pressing problems in Egypt is that of electricity supply.The persistent outages that occurred before
the coup have become longer and more frequent over the last year.Initially there was a respite as power
consumption dropped below production for a brief period but the general trend
has been negative.The government plans
to resolve the issue in the short term by increasing coal imports but these
will necessarily increase the drain on foreign currency reserves. A cleaner
alternative would be natural gas. Although Egypt has very large reserves of
natural gas, it faces increasing shortages.The government has diverted more of the gas from exports (including
small but very controversial shipments to Israel) to domestic consumption but
has been unable to increase production.The major stumbling block is the unwillingness of the government to
increase the price for foreign partners as well as the government’s inability
to pay its previous energy debts.A possible
resort to increasing imports of liquefied natural gas may briefly alleviate the
physical shortfall but at the cost of further drain of foreign reserves and
foregone investment in production.

Long-term
problems include high unemployment and continued weakness in production and
investment as well as the diminished activity in the tourist sector. Although Egyptians like to think of the
tourist attractions in their country as unique this is something of a
mistake.It is true that no other country
has pyramids so large or Pharaonic monuments so grand, but the Pyramid of the
Sun in Teotihuacan is also unique. Having visited Luxor once globetrotters are
as likely to want to see Angkor Wat as make a return visit to the temples on
the Nile.Other Egyptian tourist
attractions—sandy beaches, clear blue water, exotic scenes for scuba
diving—must compete with similar accommodations in Thailand, Mexico, Brazil,
and even socialist Cuba’s white sands of Varadero. Tourism is a source of hard
currency and Egypt’s historical attractions are uniquely important in human history but the global tourist market is
highly competitive. The number of tourists coming to Egypt dropped from 14
million in 2010 to around 9 million last year. That other destinations can be
visited without fear of disruption or political unrest makes them even more
desirable today.

One bright spot is remittances, which according
to the central bank, flow on the order of $22 billion annually.In academic discussions of the Egyptian
economy remittances are often referred to as a form of “rent” probably because,
like royalties on oil production or Suez Canal transit fees, they are paid in
hard currency. They are better thought of as as a form of export of human
capital.The higher returns abroad to
the joint investment between individual Egyptians and the state in education
are partially returned to Egyptian society through this mechanism.What is insufficiently appreciated is that
the particular form inter-Arab economic relations have taken in the past five
decades makes it possible for this economic arbitrage to function
effectively from the vantage of the state.Ordinarily migrants take their education with them as well as their
entrepreneurial talents when they settle abroad.Egyptians
cannot, for the most part, do this because although they can often enter other
Arab countries in search of employment they cannot easily become citizens in
their new homes and must return to Egypt.The Arab world would look would look very different today if millions of
Egyptians had permanently left the country over the past three decades and
become citizens in Gulf countries or Libya.

President
Sisi has also announced a plan to dig a second Suez canal and widen the
existing channel.This would allow more
ships to transit and increase revenues to the government.Increasing the capacity of the Suez Canal is
certainly a better investment than building a second Nile in the Western Desert
parallel to the existing one.Whether
the government can accomplish this in the year that President Sisi set for the
project is dubious and even the Suez Canal is no longer a certain source of
rents or hard currency.Today, unlike in
decades past, Suez and Panama--in opposite hemispheres--can compete for the shipping trade between China
and Europe.With Suez tolls for some
ships set at more than a million dollars for the round trip, the journey around
Africa or through a widened channel in Panama have become competitive for
some shippers.

The
numbers make the economic situation appear impossibly grim. There are also many
accounts detailing the stranglehold the army is said to have over the economy
with estimates of military enterprises accounting for between 5% and 40% of the
whole.It is something of a mystery in
this case why Egypt does not experience the complete collapse pundits have been
predicting regularly for the last three years. Remittances and the financial support of the
Gulf monarchies certainly make a difference. The state budget is nevertheless
under pressure and there is little reason to believe that the Armed Forces,
despite the engineering degrees held by many of its officers, will be able to
chart a successful course out of the current mess.

What
Sisi and the generals may be able to rely on at least for a while is the
informal economy.Estimates of the size
of the informal economy—defined as those enterprises that pay no taxes and
which have no legally recognized property rights—range from between thirty to
forty percent.There is every reason to
believe that the informal sector plays an important and possibly even nearly a
dominant role in urban housing markets and that informal systems of property
rights and adjudication procedures exist.Living in the informal markets for labor and commodities is precarious
but on balance it is clear that millions of Egyptians manage to do so.There is no need to romanticize the difficult
lives of those for whom pennies (or more appropriately piasters) spell the
difference between ruin and relief.What
studies there are suggest that for some Egyptians, informal employment is a
first step in a ladder to a viable livelihood and for others (women and poorly
educated men for example) it may well be an inescapable trap.Nevertheless for the moment it provides some
stability in an economy that is increasingly at risk. And it may well be that
Egyptians in the most precarious situations are the ones who most desire
stability, even at the cost of increased political repression. Sisi’s
supporters, who helped to drive President Morsi from office, are not drawn only
from the ranks of well off liberals any more than were the enemies of
Maximilien Robespierre during Thermidor of 1793.He went to the guillotine with the assent and
even the enthusiasm of much of Paris as well as the French countryside.Although Robespierre’s downfall is linked in
modern imagination with the Terror it appears in retrospect to have been more
closely connected to how opposing elites deployed issues of more widespread
popular concern: rising prices, bread shortages, and the absence of fuel.